Gold climbed for four straight weeks, rebounding 4.4
percent this month after a 28 percent plunge in 2013 that was
the biggest since 1981 as some investors lost faith in the metal
as a store of value. Lower prices are attracting buyers in Asia,
with deliveries by the Shanghai Gold Exchange almost doubling in
2013. The bear market is unlikely to reverse, and bullion will
“grind lower” over 2014 as the U.S. economy gains momentum,
Goldman analysts said in a report Jan. 12.

“There’s a tremendous divide in the gold market,” said
Jeff Sica, who helps oversee more than $1 billion of assets as
president of Sica Wealth Management in Morristown, New Jersey.
“Demand for jewelry in China is still relatively strong, and I
think it will remain strong. The bears ignore physical demand
and think that gold is not relevant when there’s no economic
crisis.”

Gold Rally

Futures in New York rose 0.4 percent last week to $1,251.90
an ounce, as the Standard & Poor’s GSCI Spot Index of 24 raw
materials climbed 0.9 percent. The MSCI All-Country World index
of equities gained 0.1 percent. The Bloomberg Dollar Spot Index,
a gauge against 10 major trading partners, advanced 0.8 percent.
The Bloomberg Treasury Bond Index added 0.2 percent. Gold for
February delivery increased 0.2 percent to $1,254.80 on the
Comex by 12:20 p.m.

The Shanghai Gold Exchange, China’s largest bullion bourse,
delivered 2,197 metric tons to customers in 2013, compared with
1,139 tons in 2012, it said Jan. 15. The Asian country topped
India as the world’s top buyer last year as demand probably
reached a record, the World Gold Council estimates.

The U.S. Mint sold 83,500 ounces of American Eagle gold
coins so far in January, heading for the biggest monthly total
since April. Holdings in the SPDR Gold Trust, the biggest
exchange-traded product backed by the metal, jumped 0.9 percent
on Jan. 17, the biggest gain since November 2011. A day earlier,
the assets were at the lowest level since January 2009.

Prices will probably rise to $1,400 by the end of the year
as the trend of investor selling in ETFs reverses and demand in
Asia gains, Commerzbank AG analysts led by Eugen Weinberg in
Frankfurt said in a report Jan. 17.

Goldman View

Goldman expects bullion to fall to $1,050 in the next 12
months as the Federal Reserve reduces monetary stimulus,
analysts led by Jeffrey Currie, the bank’s head of commodities
research, said in the report last week. Precious metals are
Morgan Stanley’s “least preferred” commodities, and physical
demand from China and India won’t be enough to support prices,
analysts Adam Longson, Bennett Meier and Peter Richardson said
in a Jan. 17 report.

The Fed, which said in December it would trim its monthly
asset purchases to $75 billion from $85 billion, will probably
keep cutting bond buying by $10 billion at each policy meeting,
according to a Bloomberg survey of economists on Jan. 10. The
central bank next meets Jan. 28-29. Gold rose 70 percent from
December 2008 to June 2011 as the Fed pumped more than $2
trillion into the financial system. Futures have plunged 35
percent from a record $1,923.70 in September 2011.

ETP Holdings

Investor holdings through ETPs fell 33 percent in the past
year, erasing $71.5 billion from the value of the funds, data
compiled by Bloomberg show. Billionaire John Paulson, the
largest holder in the SPDR Gold Trust, said in November that he
personally wouldn’t invest more money into his bullion fund
because it’s not clear when inflation will quicken.

“The concern is that the good economic news means the Fed
will pull its taper off faster than people expect,” said Dan
Denbow, a fund manager at the $950 million USAA Precious Metals
& Minerals Fund in San Antonio. “What’s going to drive gold
higher would be more concerns about geopolitical risks, an
inflation scare and just a lack of good news. We still don’t see
that happening.”

Copper Wagers

Speculators pared their net-long position in copper by 27
percent to 25,664 contracts, the lowest since mid-December.
Prices in New York capped the first weekly gain this year as
signs of quickening economic growth boosted the outlook for
demand. A supply surplus will shrink to 93,000 tons in 2015,
from 167,000 tons this year, as gains in manufacturing boost
consumption, Barclays Plc analysts said in a report Jan. 13.

The World Bank lifted on Jan. 14 its forecast for 2014
global economic growth to 3.2 percent from a June projection of
3 percent.

A measure of speculative positions across 11 agricultural
products rose 35 percent, the most since August, the CFTC data
show. Soybean holdings climbed 17 percent, the largest gain in
nine weeks. Investors were less bearish on wheat, trimming their
net-short position to 56,482 contracts, from 73,088 a week
earlier, which was the biggest bet on a decline since the data
begins in 2006.

Cattle Record

Cattle wagers jumped 13 percent to 118,856 contracts, the
highest since October 2010. Futures in Chicago extended a rally
to an all-time high on Jan. 16. Prices climbed in the five years
through 2013, the longest streak on record. Commercial beef
output in the U.S., the biggest producer, may drop 5.4 percent
this year to 24.32 billion pounds (11.03 million tons), the
lowest since 1994, the government said Jan. 10.

“As we get an improvement in global economic growth, I
think we’ll start to see that in the demand trend, which will
ultimately overtake some of the supply-growth prospects,” said
Rob Haworth, a Seattle-based senior investment strategist at
U.S. Bank Wealth Management, which oversees $113 billion.
“Ultimately, we’ll see demand start to overwhelm supply.”